Voice in the Land of All-IP

By Brad

Analysys Mason has released a new paper entitled “Voice traffic exchange in an IP world.” In it, author Michael Kende takes a deep dive into the current regulatory landscape in order to examine its effectiveness in the fast-changing telecommunications industry—specifically, the traditional public switched telephone network (PSTN) agreements, which are receiving heavy scrutiny as providers transition to all-IP networks.

Surveying the lay of the land, Kende makes a strong case that PTSN interconnection regulations are, as he puts it, “neither needed, practical, nor efficient” in an all-IP world. As he writes:

[T]he Internet serves as a compelling model for the interconnection framework governing voice services, not just because voice is migrating away from the PSTN to the Internet, but also because of the example of how unregulated networks can interconnect and evolve in response to competitive market forces. In this environment, commercial negotiations govern interconnection instead of regulation, and multi-stakeholder organizations are responsible for managing critical resources and technical standards.

To back up his analysis, Kende highlights a major difference between the past and present:

A key difference between the PSTN and the Internet is that the PSTN began as a regulated monopoly in which competitive entry was managed through interconnection obligations and other related regulations, while the Internet was characterized by competition from the beginning and never required, or was subject to, interconnection mandates. Indeed, the interconnection obligations that introduced competition into the monopoly PSTN, along with far-seeing decisions to refrain from regulating emerging data services, indirectly helped initiate the competitive environment in which the Internet emerged and thrived.

Kende also succinctly breaks the seismic shift in how people communicate in recent years:

Traditional communications – involving a call between two parties – have undergone significant shifts in the past decade. While there are a number of new forms of voice communications, described below, the Internet has fostered a whole new range of innovative communications, ranging from text-based email to video chats. The shifts can be broadly represented by three different, and overlapping, phases, which together have put significant pressure on traditional fixed-line providers.

• Change in technology. First, the technology underlying calls has been migrating to the Internet protocol, enabling cable providers among others to provide VoIP services over their broadband networks. This shift may not even be recognized by consumers, who may continue to use the same CPE, including cordless phones and faxes.

• Change in access. At the same time, consumers have new forms of access available, including mobile phones and software-based VoIP services such as Skype, which consumers can install on their computers, and more recently on their smartphones and tablets. These new access means provide consumers with increased mobility, lower prices, and/or new services such as video calls.

• Change in form. Finally, consumers have a variety of new means of communication. Some, such as email and instant messaging services, still involve one-to-one communications between users, while others, such as Facebook, Twitter, and YouTube, are one-to-many communications enabling users to ‘broadcast’ news and information to their friends, family, and/or colleagues.

The end result of these three different phases is significantly increased choice for consumers, and not only new forms of competition for providers of PSTN services, but ultimately its replacement.

Kende’s full white paper is definitely worth digging into. It’s available here as a free download, although you’ll need to register first to access it. Check it out.

Spurring Investment in Faster Broadband

By Brad

Earlier this week, Robert E. Litan penned an editorial for Bloomberg in advance of his new report (co-authored by Afzal Bari) titled “Faster Broadband: Policies and options for spurring expanded access to the next generation of Internet speeds.” Both in his opinion piece and study, Litan argues that when comes to achieve faster broadband, the FCC should be focusing more on spurring competition than on regulations. From the Bloomberg piece:

We are encouraged that the FCC seems intent on proceeding with its spectrum auctions in 2014 (though we wish this had happened earlier), but are less optimistic that the commission will reverse its policies of the past four years that are inconsistent with the deregulatory agenda that would really unleash competition in the broadband market and accelerate the race for faster broadband speeds.

In Litan and Bari’s study, they dig a lot deeper — specifically when it comes to steps the FCC can take:

One policy that would surely help is speeding up the auctions of wireless spectrum. Other deregulatory measures, aimed primarily at reducing the costs and increasing incentives for wireline broadband providers to build fast broadband networks, also are available:

• Removing legacy regulations on telecom carriers designed for outdated copper networks that discourage investments in modern broadband networks.

• Allowing broadband providers to charge for premium delivery services (just as on-line retailers do for more rapid shipping, and airlines and railroads do for first-class seating).

• Adopting the current case-by-case approach to resolving complaints of discrimination against vertically integrated cable video providers for resolving similar disputes in the broadband arena.

• Eliminating duplicative merger authority by making the FCC an advisor on telecom mergers, with ultimate authority resting with the Justice Department, where it belongs.

• Eliminating the FCC’s ability to condition spectrum purchases on the identity, business plans or spectrum holdings of the bidder, practices which inhibit wireless competition to wireline broadband providers.

You can download of a PDF of Litan and Bari’s study here.

Wireless World

By Brad

Via Kevin Fitchard of GigaOm, a new report from Ericsson predicts a big leap when it comes to mobile broadband access worldwide:

It took 12 years for 3G technologies to touch half of the world’s population, but getting to 85 percent coverage will only take another five, according to wireless infrastructure vendor Ericsson. New HSPA+ and LTE network deployments will lead to a near blanketing of the world’s populated areas with mobile broadband by 2017.

Ericsson’s report is available on their website.

Our New Study: Top 10 Ways Broadband Saves American Entrepreneurs Money

By Brad

Today, in partnership with the Small Business and Entrepreneurship Council (SBE Council), we released our latest study on the top 10 ways America’s entrepreneurs can save money with broadband.

To see the results in a cool interactive, click on the feature above or head here. You’ll also find our methodology, along with an embed code. Our press release on the study is available in the Press Room.

Our thanks to the SBE Council for their help in putting this together.

(cut and paste below to include this graphic on your blog)

<img src="http://www.internetinnovation.org/small-biz/Start-Up-Savings-IIA-SBE-graphic.png" style="border:solid 1px #ccc">

The App Economy

By Brad

A new study from policy group TechNet sheds some light on just how important the mobile app economy — and mobile broadband — are to America’s economy. The full study, titled “Where the Jobs Are: The App Economy,” is available here (PDF), but some of the highlights include:

• The App Economy is now responsible for over 466,000 jobs in the U.S., which is pretty amazing when you take into account the fact that it was only in 2007 and the release of the iPhone that the industry started.

• In December of 2011, Apple’s App store had over half a million active apps, which were uploaded by over 100,000 publishers.

• California, New York, and Washington State lead the charge in the App Economy, but more states are joining the part every day.

TechNet’s full study is worth digging in to.

Encouraging the Next Leap Forward

By Brad

The effect mobile broadband investment and deployment has had on innovation is easy to see. All you need to do is flip through the apps on a smartphone, or fire up Netflix on an iPad.

Less apparent has been the effect on the U.S. economy, specifically when it comes to job creation. Now a study from NDN and the New Policy Institute, “The Employment Effects of Advances in Internet and Wireless Technology,” for the first time provides some startling new numbers. Authored by Robert J. Shapiro and Kevin A. Hassett, the study examines the positive effects network advancements have on the economy.

Case in point: the move from 2G to the current widespread 3G, which the authors find offered a major boost the economy. As they write:

New econometric analysis set forth in this study shows that the investments and innovation entailed in the transition from 2G to 3G wireless technologies and Internet infrastructure spurred the creation of some 1,585,000 new jobs from April 2007 to June 2011.

That’s more than 1.5 million jobs during a time, the authors point out, that the U.S. economy lost close to 5.3 million jobs in the private sector. And with providers in a highly competitive market currently building out the next-generation of networks, another major boost could be on the horizon:

The rapid transition from 3G to 4G mobile broadband networks should continue to stimulate new jobs creation in a short time frame, generating more than 231,000 jobs for every 10 percentage point gain in penetration rates within a year.

In other words, the more 4G is built out, the more jobs there will be for Americans. While this may seem like a no-brainer — doesn’t investment and construction almost always create jobs? — Shapiro and Hassett make the argument that the government must do more to encourage a speedier build-out by an industry leading the way to economic recovery. As they write:

These results suggest that a national job creation strategy should include or encourage appropriate measures to accelerate the deployment of 4G infrastructure.

The study goes on to explore some particular areas, including health care and public safety, that will benefit greatly from accelerated 4G deployment. On the proposed nationwide wireless communication network dedicated to public safety, the authors write:

This 4G-based network could be especially valuable when major terrorism or natural disasters strike. The original impetus came from the 9/11 Commission’s criticism of the lack of inter-operable communications systems among the diverse first-responders at the World Trade Center, and the resulting vulnerabilities for homeland security. The benefits from more routine use of the system also would be considerable. The begin, the initial proposed funding of $10.7 billion would create nearly 100,000 new jobs for network planners, laborers to lay and install cable, and technicians to build and install network devices, wireless access points, video surveillance cameras, gunshot detectors, and environmental sensors. As the network is established, it would create more jobs for network administrators and managers, technical support staff, network analysts, project managers, and IT analysts.

100,000 jobs — and that’s just from public safety build-out. To get the full picture on how speeding up the deployment of 4G technology can transform our economy, check out Shapiro and Hassett’s full study. You’ll not only come away encouraged about the future, you’ll learn stuff like this:

Mobile providers rolled out the first generation of cellular wireless networks in the United States in the early-1980s, before the commercial emergence of the Internet. Until that time, mobile phones relied on tall, high-power transmitters and receivers which used a limited number of radio frequencies to cover entire cities. These conditions sharply limited the network capacity and these mobile phones. For example, the first mobile phone network for New York City could support a total of 700 mobile customers and no more than 12 conversation at any time.

Shapiro and Hassett’s full study, “The Employment Effects of Advances in Internet and Wireless Infrastructure: Evaluating the Transitions from 2G to 3G and from 3G to 4G,” is available here in a PDF. Check it out.

Connecting All of America

By Brad

With the FCC currently working to overhaul the Universal Service Fund to reflect the digital age, a new paper from Georgetown University’s McDonough School of Business examines the effect increased broadband access would have on rural communities. Authored by Jeffrey Macher and John Mayo, “Achieving Rural Universal Service in a Broadband Era: Emergent Evidence from the Evolution of Telephone Demand” finds that increasing the availability of broadband is “not only a tremendous equalizer to rural areas, but also especially beneficial to rural areas by ameliorating or eliminating the economic challenges of geographic isolation and economic specialization.”

To connect rural areas, Macher and Mayo focus on wireless broadband, which when it comes to buildout is relatively cheaper for rural areas than wired connections. But the authors also caution that unless policies are enacted that ensure wireless broadband is continued to grow — specifically, the allocation of much-needed spectrum resources — the buildout to every corner of America will be drastically slowed, if not outright impeded. As they write:

[E]ven with the relative advantages of wireless broadband in rural areas, spectrum constraints have slowed the private sector’s ability to deploy wireless broadband in sparsely populated areas. This lag is especially lamentable in light of the high demand for mobility by rural consumers.

Macher and Mayor state they are encouraged by the recent focus on spectrum by policymakers. They also encourage the approval of the merger of AT&T and T-Mobile, writing:

[T]he accelerated deployment of broadband promised by the merger may not only facilitate the ability of the mobile telephone industry to better satisfy demand in rural areas, but also serve as an important platform and lubricant for future economic growth in these areas.

The full paper is available on the McDonough School of Business website. You can also download a copy of our rural broadband infographic, “10 Ways Broadband Helps Rural Communities.”

Cost Campaign 2011

By Brad

To coincide with this week’s CTIA Enterprise and Applications Convention in San Diego, we updated our “Top 10 Ways Being Online Saves You Money” study. Sources and methodology are available here. You can also compare this year’s study to last year’s.

Telemedicine, Mobile Broadband, and the Future of Medicine

By Brad

One of the guest speakers at our broadband symposium earlier this week was Dr. Alexander Vo, Executive Director of the University of Texas Medical Branch Center for Telehealth Research and Policy, and co-author of a new study IIA sponsored entitled “Benefits of Telemedicine in Remote Communities & Use of Mobile and Wireless Platforms in Healthcare.”

Here’s a highlight from a section on the power of mobile broadband:

With more than 302 million wireless subscriber connections and more than 26 percent wireless-only households in the United States, mobile phones have become a ubiquitous element in American life. Moreover, the handheld smart phone and its data network constitute the game-changing technology that will affect how we view our healthcare providers and the health care system. Today’s smartphones are not only powerful computing devices (1 to 1.5 GHz processors) connected to a worldwide, high speed data network, but they can also be configured with various onboard applications that connect to special sensors via a standard wireless interface (Wi-Fi or Bluetooth). In addition to the underlying hardware, these devices now support powerful standardized software operating systems like Android and iOS. This powerful computing system, capable of networking with local and distant devices, opens an interesting set of healthcare possibilities.

Today, a physician can realistically conduct a videoconference with a patient from both of their mobile devices. While that is considered amazing, it is not much different than the telemedicine consultations conducted between two different medical clinics or a physician’s office and a patient’s home… The addition of real-time biometric monitoring or telemonitoring with data fusion made possible by our high-speed wireless data networks adds a level of sophistication and is part of our immediate future.

The full study (PDF) is definitely worth your time.

A Boost in Speed, a Boost in Jobs, a Boost for the Economy

By Brad

Speaking of LTE mobile broadband deployment — and the many benefits thereof — Roger Cheng at CNet highlights a new study from Deloitte that found some impressive numbers for jobs and the overall economy as providers build out their networks:

The wireless carriers’ investment in 4G networks could be the salve that the ailing U.S. economy is looking for.

The carriers could invest between $25 billion and $53 billion in building out their 4G network through 2016, according to a study from Deloitte. That in turn could lead to the creation of 371,000 to 771,000 jobs, and gross domestic product growth of $73 billion to $151 billion.

In the study (available here in PDF form), Deloitte notes those numbers for buildout are “conservative,” and when you factor in jobs beyond installing networks — new businesses and jobs spurred by expanded access and powerful technology — the overall effect on America’s economy could be enormous.

Not So Fast

By Brad

Wi-Fi has revolutionized the way we consume the Internet. But according to a new study (PDF) from research firm Epitiro, when it comes to speed wired connections still rule the roost. Via Lance Whitney of CNet:

Tracking the broadband connections of sample users in the U.S., U.K., Italy, and Spain, Epitiro found that on average people lost around 30 percent of their download speed using Wi-Fi over wired. Further, Wi-Fi users ran into a 10 to 20 percent increase in latencies, or delays, when downloading content.

The study goes on to suggest that the gap between wired and wireless could mainly be due to Wi-Fi routers sharing channels with nearby networks or other wireless devices (such as remote controls and baby monitors).

The Problem of Competing With Free

By Brad

PricewaterhouseCoopers has released a new study on online privacy. At GigaOm, Janko Roettgers digs into the findings:

Respondents signaled some willingness to pay, but not much — and the vast majority said that they’re going to continue to hunt for free loot. However, people don’t seem to mind ads, so the Hulu model might actually working to curb piracy.

Streaming clearly dominates video piracy, with 82 percent of respondents saying that they get their TV fare as streams, and 69 percent streaming pirated movies online. 62 percent admitted to downloading TV show episodes, and 52 percent do so with movie titles.

The full study is available at PricewaterhouseCoopers.

The Internet Community

By Brad

Via Juliana Gruenwald of the National Journal, a new report from the Pew Internet & American Life Project finds that a whopping 80% of Internet users volunteer in a group or organization. For Twitter users, the number is even higher.

New Data on the Digital Divide

By Bruce Mehlman

“Exploring the Digital Nation: Home Broadband Internet Adoption in the United States” is a new study from the Economics and Statistics Administration and the National Telecommunications and Information Administration aimed at providing “authoritative, nationally-comprehensive data on access to the Internet throughout the United States.”

The entire report (PDF) is required reading, but here’s some findings worth highlighting:

� African American households with the same income and education level as white households are still less likely to have broadband access.

� The adoption gap between rural and urban households is 7%; between non-Hispanic whites and non-Hispanic blacks, the figure is 10%.

� Overall, 7 of 10 households used the Internet in 2009; nearly one-fourth of all households did not have an Internet user.

� Households that did not use the Internet at home but reported using it elsewhere ranked affordability as the primary obstacle to home adoption.

� Households making less than $25,000 a year saw usage jump from 3 percent to 36 percent from 2001 to 2009; whereas households making more than $75,000 a year saw usage increase from 36 percent to 92 percent over the same time.

Broadband Fact of the Week

By IIA

A recent study shows that the rate of broadband adoption among lower-income households will increase by more than 34 percentage points from 2009 to 2013.

— Shapiro, Robert and Kevin Hassett. “A New Analysis of Broadband Adoption Rates by Minority Households.” Georgetown Center for Business and Public Policy. Washington D.C. June 22, 2010.

Learn more facts in our ever-expanding Broadband Fact Book.

Guest Blog: Mike Jude

By IIA

Stratecast has released a new study entitled “Net Neutrality & Broadband Access: Hindrance or Help?” which examines the possible effect proposed regulations on broadband providers would have on investment, broadband deployment, and the National Broadband Plan. We’ve asked Mike Jude, Ph.D. of Stratecast to distill some of the study’s findings. — IIA.

Following the Federal Communication Commission’s announcement that it was pursuing reclassification of broadband service until Title II, network operators warned that, even with promises from the FCC about forbearance, an uncertainty of regulation can severely hurt investment.

Our findings back up network operator concerns. For the most important elements influencing investment decisions (such as ARPU [average revenue per user], CAPEX, OPEX, and innovation), risk is the enemy of investment since it inserts uncertainty into the expectations of revenue and return of investment. Put another way, network operators decide how much to invest based on the outlook for long term return. As we note in the study:

ARPU growth is impacted by net neutrality since one can make the assumption that, to the extent that net neutrality impacts the ability of an operator to offer competitive services, it could reduce the revenue per user. The model predicts that such erosion can be significant…ARPU— the amount that an operator can generate per subscriber in the presence of net neutrality — can be as much as $80 per month less at the limits of this projection. Since this amount is almost exclusively derived from premium services, above the access rate, the impact on the operator is obvious — a dubious investment.

Obviously, this loss will have a major impact on network operator revenues — as much as $4-$5 billion per year, as soon as next year. The ripple effect of this loss would also effect the U.S. economy through the loss or prevention of up to 70,000 jobs by the end of 2011.

These are just some of our findings. Overall, we see the potential for great harm in imposing broadband reclassification and net neutrality.

Mike Jude, Ph.D.
Program Manager — Consumer Communications Services, Stratecast

Required Reading

By Bruce Mehlman

From a new study conducted by the Progressive Policy Institute entitled The Coming Communications Boom? Jobs, Innovation, and Countercyclical Regulatory Policy: 

There’s little doubt that a permissive regulatory regime for derivatives and securitization helped foster the housing boom, creating millions of jobs in construction and finance. But it also set the stage for the financial crisis that eventually sent unemployment soaring. Right now regulators seems intent on tightening the regulatory regime on the communications sector, despite it being one of the few growth sectors in the economy, and despite the fact that communications-related industries were completely blameless in the housing boom and bust. The Federal Communications Commission (FCC) is considering imposing tighter regulations on broadband, bringing it under the same common carrier rules that govern older phone networks. That would be part of a move towards net neutrality, a policy that would require broadband providers to follow rules about what kind of service and products they could offer. There are different approaches to net neutrality, but the strictest version would be like requiring airlines to sell all tickets to a particular destination at the same price, no matter what the time of day or when the ticket was bought.

The debate over net neutrality is intense. But whether or not you think that such a move is a good idea, it seems unlikely that such regulations would boost investment or employment in the telecom industry. The experience of the airline industry suggests that differentiated pricing and service is an essential part of keeping a high-fixed-cost industry running.

The full study — required reading for anyone interested in the current Internet regulations debate — is available at the Progressive Policy Institute’s website.

Apps on the Go

By Brad

According to a new study from Juniper Research (via Read Write Web), the market for mobile apps is expected to reach $32 billion within the next five years.

Cutting the Cable Cord

By Brad

Via TechCrunch, a new report from an outfit called Convergence Consulting Group finds that an estimated 800,000 homes in America dropped cable last year in favor of getting their entertainment needs online.

Innovation in the Ecosystem

By Bruce Mehlman

The American Consumer Institute has released a new study, “Innovation and National Broadband Policies: Facts, Fiction and Unanswered Questions.” From the Executive Summary:

“Innovation” has emerged as a pivotal element in the debate over whether the Federal Communications Commission (FCC) should impose new constraints on managers and providers of broadband network infrastructures. This study brings to bear facts and analysis emerging from a review of much of the literature on innovation and especially that bearing on claims by advocates of “net neutrality,” “open networks” and related notions.

We find that innovation is thriving at both the core and the edge of the network in the current policy environment, which has fundamentally allowed the Internet to evolve with little government involvement. Further, we find no evidence that greater FCC involvement in markets for broadband services would protect or promote innovation in the Internet Ecosystem. Indeed, we believe that such intervention is more likely to discourage innovation than stimulate it.

The full ACI study is available on their website (PDF).